Status: 05.12.2022 10:48 a.m
After hitting a 24-year high at 85.5 percent in October, inflation in Turkey eased slightly in November. Consumers must continue to dig deep into their pockets.
In November, high inflation in Turkey eased for the first time in about a year and a half. Goods and services increased by an average of 84.39 percent compared to the same month last year, the statistics office said. In October, the inflation rate was still 85.51 percent. The number one price driver continued to be transportation costs, which include fuels such as petrol. They increased by 107 percent.
Grocery and non-alcoholic beverages increased by more than 102 percent. Consumers also had to spend more money to buy furniture and household appliances: they cost an average of 92.83 percent more than in November 2021.
Inflation is driven by several factors
The main reason for the sharp rise in prices is the consequences of the Russian war against Ukraine, which has made many raw materials significantly more expensive. However, the sharp increase in inflation so far is also closely related to the weakening of the lira: the national currency lost 44 percent of its value against the dollar last year, and another 30 percent so far this year.
According to economists, one of the reasons is the monetary policy of the Turkish central bank. In November, despite high inflation, it lowered its key interest rate back into the single digits for the first time in more than two years: it was reduced from 10.5 percent to 9.0 percent. President Recep Tayyip Erdogan had previously called for the level to drop to single digits by the end of the year. The central bank started easing its monetary policy more than a year ago. At that time, the interest rate was still 19 percent.
Last rate cut despite record inflation
This course contradicts conventional economic teaching. The vast majority of experts recommend fighting high inflation with higher interest rates, as the US Federal Reserve and the European Central Bank (ECB) are trying to do. Argentina, where inflation is also more than 80 percent, recently set interest rates at 75 percent.